Identify the sources of income and the costs that arise when holding and running an equity portfolio, and explain how each affects performance

Income comes from dividends, from lending securities to short sellers for a fee, and from ancillary strategies such as writing covered calls or cash-secured puts, which collect option premiums but cap upside or add downside exposure. Costs include management and performance fees, custody and administration charges, marketing and distribution fees, and trading costs: commissions, stamp duties and other transaction taxes, bid–ask spreads and market impact. Withholding tax on foreign dividends also reduces net income. Net return equals gross return plus income minus all of these costs, so high turnover or a heavy fee structure can erase any stock-picking skill. Lending income comes with counterparty and collateral reinvestment risk, which is easy to overlook.